Building a City: Regulating the Sharing Economy in Amsterdam

Originally published by Medium.

From dads with DIY projects to fashionistas seeking the latest trends, Amsterdam’s tenacious citizens are ripping up the rulebooks and bringing trade into the 21st century. How did a city enable its citizens to think differently and connect in new ways?

In the hip Amsterdam district of Jordaan, a woman walks into an award-winning fashion boutique. She pulls her fingertips through racks of emerging designers and vintage classics. When she’s picked out the perfect dress, she takes it to the counter and greets the clerk with a smile. No cash exchanges hands. Next week, the shop will take the outfit back, no questions asked, so she can exchange it for something else.

Over the next few weeks, that same customer can exchange her latest selections as many times as she wants for the set monthly price she pays. This is Lena — the world’s first “fashion library,” where clothes are borrowed in real life via subscription. An endless wardrobe for as little as €25 per month makes quite the antidote for the trends of fast fashion and mass consumption.

Lena is just one of many Amsterdam startups ditching the notion of fixed ownership in favor of shared access to goods and services. This same idea has propelled companies like Uber, Airbnb, and Deliveroo to global prominence. Now Amsterdam is paving the way for the collaborative economy’s next frontier.

Four years ago, innovation consultant Harmen van Sprang and masters student Pieter van de Glind decided to join forces. Inspired by the quickly growing sharing economy in Seoul, South Korea, they set up ShareNL — a think tank that works with startups, corporations, governments, and research institutions to unlock the potential offered by technology and sharing. Their goal was simple: to turn Amsterdam into Europe’s first sharing city.

“The city government invited me to speak about my collaborative economy thesis, which presented an interesting window of opportunity,” says van de Glind. “Because there were so many policymakers in the room, I decided to keep it short and present the simple idea that citizens want to share and that Amsterdam should become a ‘sharing city.’”

The session made an impact. Over the months that followed, the idea of Amsterdam as a sharing city gained momentum. The campaign provided a focal point to showcase the attractiveness of the Netherlands as a location to incubate and accelerate disruptive startups, thanks to the country’s digitally literate and entrepreneurially minded population.

In 2015, Kajsa Ollongren, vice mayor of Amsterdam, publicly recognized the potential of the collaborative economy in a speech, signaling the city’s intention to further encourage and facilitate sharing. In less than two years, a simple idea was transformed into the Amsterdam Sharing Economy Action Plan, setting out how the city would attempt to formalize collaborative platforms and establish a less-prohibitive regulatory environment. As it turns out, that was only the beginning.

The business of sharing has become a global phenomenon. Thanks to the rise of global platforms (and the familiarity they bring to the concept), people across the world — in developed and developing countries alike — are becoming part of a collaborative economy. “Digital platforms are enabling people to find each other and share assets, labor, and knowledge,” says Martijn Arets, a digital economy author and researcher based in Amsterdam. “The thresholds for strangers trusting each other have never been lower than they are today.”

According to PwC, the European sharing economy will facilitate nearly €570 billion in transactions by 2025. Across its five key sectors — accommodation, transport, household services, professional services, and collaborative finance — the sharing economy will eclipse its traditional counterparts within a decade. But to achieve sustained growth and take advantage of the opportunities the sharing economy offers, governments in Europe need to develop regulation that’s balanced, coordinated, and dynamic. To do that, they need to work together, and urban areas are fertile testing ground for the potential solutions of the sharing economy.

The collaborative economy, however, is still seen as an unwelcome disruption in many cities. Benefits like increases in productivity and fewer idle assets can come at the expense of safety and wages. The playing field is far from level for established companies and these new market entrants, and unfair competition has angered citizens and regulators alike. To combat excessive rent prices, officials in Berlin banned short-term Airbnb rentals. In Copenhagen, stringent regulations have forced Uber out of the city entirely. Whether government actions like these are reflective of citizens’ wishes is a question that Amsterdam has tackled head-on — with interesting results. Research shows that 84 percent of Amsterdam’s citizens are willing to try at least one service offered by the collaborative economy.

So rather than focusing on what they should ban or limit, Amsterdam officials began their journey toward “sharing city” status by asking how the sharing economy could provide local residents with easier and more affordable access to goods and services.

“We looked at all our existing rules and regulations, and from that began to make new policy,” says Nanette Schippers, sharing economy program manager for the city of Amsterdam. “We said, for example, that it’s okay to rent out your home on Airbnb as long as you follow a few simple rules, like, for example, paying income and tourist taxes.” This proactive approach meant becoming the first city in the world to negotiate with the platform directly. And it turned out they had more in common than expected.

Both sides wanted to prevent dubious hosts from breaking fire safety regulations and operating illegal hotels via the platform, so it was clear that action in this area would be a good place to start. Amsterdam officials worked together with Airbnb to decide the best ways to execute the city’s existing guidelines via the platform. This involved working together on enforcement, launching a campaign to educate Airbnb hosts, and adding the facility to pay tourist taxes directly through the website. Hosts are allowed to rent out their homes to a maximum of four people at a time and for no more than 60 days a year.

“If hosts go over this limit, they have to have a hotel license and be subject to relevant hotel laws,” explains Schippers. “In principle, this is impossible because the rules concern homes, not hotels. We want people to live in homes in our city, not buy them up and rent them out to tourists for profit full-time.”

It took more than a year to hash out the specifics, but when the deal was finally made, it was a landmark moment. The principle of regulating the platform economy to fit the needs of citizens was established, and it set an example for city officials worldwide. By demonstrating willingness to find common ground, Amsterdam was able to send a message to those looking to kick-start a sharing economy project: Let’s work together and make it happen.

Today, tens of sharing economy startups operate in Amsterdam. Peerby helps citizens borrow things as diverse as badminton rackets, electric drills, and pop-up tents from their neighbors, and now operates around the world. Barqo, a startup that emerged from Amsterdam’s canals, facilitates boat sharing via a platform that’s quickly becoming a staple for Europeans who are passionate about sailing.

The city is buzzing with sharing activity, and the majority of Amsterdam’s sharing apps are homegrown. By demonstrating that policymakers were open-minded and willing to engage in direct dialogue with disruptive startups instead of simply shutting them down, the city demonstrated a commitment to digital innovation and entrepreneurship that’s helping it generate additional tax revenues and attract tech-savvy tourists. The result is a thriving scene that marks Amsterdam as an early adopter of what analysts expect to drive the economies of the future: platforms.

“Remember, it’s not just governments that are learning from experimentation with these platforms — the platforms are learning, too,” says Arets. “The best way to succeed is by working together with platforms, not against them. Amsterdam started doing this really early, putting them far ahead of other cities today.”

Amsterdam has invested time in identifying common ground with the disruptive forces of tomorrow’s economy. With cities growing at an exponential rate and facing enormous environmental and social challenges, finding innovative ways of using technology for community good is vital. But platforms need to share the responsibilities as well as the market opportunities of the new, collaborative economy — and there’s little reason to believe Silicon Valley’s latest darlings can be trusted to regulate themselves.

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